2012 (9) TMI 427 - AT - Income Tax

Addition on account by applying the GP rate on assumed turnover Assesse is in business of plying of trucks Assessee has sold 7 and acquired 4 during the F.Y - AO apply GP rate on the basis that, assessee has transferred the vehicles in question on paper only as a colourable device to avail Sec. 44AE Held that - During search proceedings no incriminating evidence were found by the department to suggest that the vehicles even after the sale thereof in fact belonged to the assessee and that the assessee owned them as benami and was actually the owner of the more than 10 trucks in any of the relevant assessment years. Sale proceeds from vehicles were recorded in the bank account and the value of the block of assets was reduced by the said amount. If AO has applied the GP rate, he has also to allow the depreciation thereafter and by doing so, the income becomes lower than the returned income of the assessee. Decision in favour of assessee. Addition on account of unexplained expenditure - Addition was made on basis of some entries written by pencil on the loose paper found during search Held that - In the absence of any evidence before us to controvert the findings given by the CIT(A), hold that no interference is called for in the order of the CIT(A) on this issue. Appeal decides in favour of assessee Addition on account of unexplained expenditure u/s 69C Addition on the basis of some seized loose paper found during search - On which some petty cash advances written on different dates given to persons Held that - As the entries mentioned in the loose paper tallies with the regular books of accounts of the assessee, there remains no valid reason for making any addition under section 69C. Decision in favour of assessee

Summary

Issues:
1. Interpretation of Section 44AE of the Income Tax Act for assessing income from plying trucks.
2. Determination of unaccounted income based on seized documents during search and survey.

Analysis:
1. Interpretation of Section 44AE:
The case involved appeals by the Revenue against the orders of the Commissioner of Income Tax (Appeals) for various assessment years. The primary issue was the application of Section 44AE of the Income Tax Act for assessing income from plying trucks. The Revenue contended that the assessee owned 12 trucks during the relevant period, exceeding the limit of 10 trucks under Section 44AE. The Revenue argued that the assessee had transferred some vehicles on paper to fit into the requirements of the section. However, the assessee provided evidence that out of the 12 vehicles, 7 were sold and 4 were acquired during a specific financial year, keeping the total vehicles owned below 10. The Tribunal found no evidence to support the Revenue's claim of benami ownership or that the assessee exceeded the 10-truck limit. Consequently, the Tribunal upheld the CIT(A)'s decision to apply Section 44AE to estimate the assessee's income from plying trucks.

2. Determination of Unaccounted Income:
Another issue in one of the appeals was the addition of unaccounted income based on entries in seized documents during search and survey. The Revenue alleged unexplained entries amounting to Rs. 1,61,207 on a loose paper file seized during the search. The CIT(A) found that the claimed entry did not exist on the seized paper and therefore deleted the addition. Similarly, there were additional unexplained expenditure entries of Rs. 5,51,000, which the Revenue sought to add. The assessee explained that these entries were for marble purchases for house construction, supported by regular books of accounts. The Tribunal agreed with the CIT(A) that the explanation was valid, as the entries matched the books of accounts, leading to the deletion of the additions. The Tribunal dismissed the Revenue's appeal on these grounds.

In conclusion, the Tribunal dismissed all Revenue's appeals, upholding the CIT(A)'s decisions on both issues. The judgments provided clarity on the interpretation of Section 44AE for assessing truck income and emphasized the importance of valid explanations supported by proper documentation to refute claims of unaccounted income based on seized documents.